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Bank Of England Publishes Discussion Paper On New Forms Of Digital Money And Summarises Responses To The 2020 Dialogue Paper On Central Financial Institution Digital Currency

In normal instances, the Bank implements financial policy by setting the interest rate on central financial institution reserves. This then influences a spread of rates of interest in the financial system, together with these on bank loans. Although commercial banks create money by way of lending, they cannot accomplish that freely with out limit. Banks are restricted in how much they will lend if they're to stay profitable in a competitive banking system. Prudential regulation additionally acts as a constraint on banks’ activities so as to keep the resilience of the monetary system. And the households and firms who obtain the cash created by new lending might take actions that affect the stock of cash – for instance, they may shortly ‘destroy’ cash through the use of it to repay their existing debt.

Before society can realise potential advantages from new forms of digital money, it is important that perspectives on these issues from a variety of stakeholders are understood. Most of the world's central banks are looking into the potential for creating such a currency, however the only one already in existence is China's digital yuan, which is at present present process public testing. Chancellor Jeremy Hunt mentioned the central-bank digital currency (CBDC) might be a new "trusted and accessible" method to pay. We are additionally working internationally with other governments and central banks. For instance دوره ارز دیجیتال we've worked with the Bank for International Settlementsand nbsp;on projects such as Rosalind, which goals to develop innovate use circumstances for CBDC.

The government should additionally weight the potential impacts on monetary policy and the operational administration of the switch from standard money to a CBDC. Virtual currencies are unregulated digital currencies controlled by developers or a founding organization consisting of varied stakeholders concerned in the process. Virtual currencies can be algorithmically managed by an outlined community protocol.

For instance, when a bank extends a mortgage to someone to buy a home, it doesn't sometimes accomplish that by giving them hundreds of kilos value of banknotes. Instead, it credit their checking account with a financial institution deposit of the size of the mortgage. An different state of affairs is one in which commercial banks reduce lending to the real economy. In this case, it's potential that non-banks would extend extra credit to the real financial system directly. Many advanced economies operate with greater ranges of non-bank finance than the UK and with correspondingly smaller shares of family assets held as deposits with the banking system (Chart 1.1). But non-bank finance is unlikely to be a perfect substitute for bank finance, particularly for lending to some smaller corporations.

These initiatives might make vital impacts on the payments landscape, even with none new types of digital money. The objective of these expectations is to make sure the same degree of public confidence in stablecoins – both as a way of fee and a retailer of worth – as business bank money. How the FPC’s stablecoin expectations could be met in apply is discussed in Section 5 of this Discussion Paper. The Bank’s selections round new forms of digital money might be guided by its core goals, central to which is guaranteeing confidence in sterling.The Bank’s mission is to advertise the great of the individuals of the United Kingdom.